Fitch Ratings upgrades Nova KBM | NKBM

Today, Fitch Ratings upgraded Nova KBM´s Long-Term Issuer Default Rating (IDR) to 'BB-' from 'B+', with the rating being assigned a stable outlook. The rating upgrade reflects the strong and profitable performance of Nova KBM in 2015, the reduction of its NPLs by almost a third, and an extended track record of its asset quality improvement.

Fitch Ratings upgrades Nova KBM

Today, Fitch Ratings upgraded Nova KBM´s Long-Term Issuer Default Rating (IDR) to 'BB-' from 'B+', with the rating being assigned a stable outlook. The rating upgrade reflects the strong and profitable performance of Nova KBM in 2015, the reduction of its NPLs by almost a third, and an extended track record of its asset quality improvement.

In addition to upgrading its IDR, Fitch Ratings raised Nova KBM´s Viability Rating (VR) by one notch, to 'bb-' from 'b+'. The Support Rating (SR) and the Support Rating Floor (SRF) were affirmed at '5' and 'No Floor', respectively. The upgrade of VB was driven mainly by Nova KBM´s asset quality improvement as expressed by a gradual reduction in its legacy NPLs, as well as by its improved capital and liquidity positions. Nova KBM´s rating upgrade also reflects gradual improvement of the operating environment and ongoing restructuring of the Slovene corporate sector.

According to Fitch Ratings, the key challenges that Nova KBM and the other rated Slovene banks will have to deal with going forward are as follows: a further reduction in the level of NPLs, cost-efficiency, provision of adequate profitability and the strengthening of lending activity. As regards the latter, low demand for new loans and certain lending restrictions arising from its restructuring programme prevent Nova KBM from growing its loan portfolio. Fitch Ratings considers that NPLs (i.e. loans past-due by 90 days or more plus loans rated D and E) on the books of Nova KBM are reasonably covered by impairment reserves and that there is a track record of gradual NPL recovery.

Robert Senica, President of the Nova KBM Management Board, commented on the rating upgrade and prospects: “While the rating upgrade is certainly encouraging news for our future business, we see the recent change in the ownership of Nova KBM as an important strategic opportunity for its further growth and development. Among the core priorities that we are implementing under the auspices of the new owners, namely the financial fund Apollo and the EBRD, are the strengthening of our market position, building strong partnerships with our retail and corporate customers, and striving for outstanding results to the benefit of all those cooperating with Nova KBM.”

Nova KBM ended 2015 with a net profit of €34.4 million, while the net profit of the Nova KBM Group hit €16.9 million. Last year, Nova KBM continued to successfully implement its restructuring programme, to cut its operating costs, and to increase its market share in terms of total assets, customer deposits and customer loans. Moreover, it managed to reduce the level of its net NPLs by 31%, including through participation in several corporate restructurings.